Facebook Puts Self Up For Sale: $10 Billion

[From Silicon Alley Insider]. Few seem to have noticed, but Facebook has now officially put itself in play.  Peter Thiel, a Facebook investor and director, granted a detailed interview to The Deal last week in which he rejected several lowball offers that have reportedly come over the transom--$3 billion range--and essentially offered to sell the company for $7-$10 billion.  The announcement would not have been any more direct if Facebook had written an open letter to Google saying: "Dear Eric: $10 billion and we're yours."

Yes, of course, Thiel also threw in all the required noises about how Facebook has no interest in selling, no interest in going public, etc., to make sure that when Google does walk in the door, it will be the Google folks who are selling.  He also explained why Facebook wasn't ready to sell (not developed enough) and why those who gripe about Facebook's low revenue are missing the point (we don't care about revenue yet).  But make no mistake: Any time a company is this specific about what it would take to get it to the table, it's for sale.  What's more, it's probably for sale at the low end of Thiel's $7-$10 billion range.

As a last gesture of helpfulness, Thiel was also kind enough to tell everyone how much revenue Facebook will generate this year--$150 million (so assume at least $200 million--have to set the bar low)--of which half comes from the Microsoft deal.  So, there, Google and Microsoft investment bankers, you now have everything you need.

Let's see, at today's Google stock price of $515, a $10 billion Facebook buy would amount to about 6% -7% dilution.  A veritable tuck-in!  And none of the copyright headaches that came along with the $1.7 billion YouTube acquisition.  Microsoft?  Why, you'll generate $10 billion in cash in the next few months.  So, step right up!  Yahoo? Um, sorry, missed your chance last year when you could have had it for $2 billion. David Shabelman, The Deal.  DealBook, NYT

Comments

[Bjorn]

That's a lot of risk because there may be plenty evidence (ala Xanga, Friendster, MySpace?) that social sites that gear to younger people could be fads. Going to a new place is as quick as typing in a URL, just bring your friends. Is that place going to be the same place your older sister (or eventually mom) hung out?

Notably Tagged is growing pretty quickly, and there's plenty of other competition. Can you think of an institution that has managed to continuously appeal to one wave after another of teenagers? Would you want to spend that much money for a site that may fizzle in a few years and be forever known as an artifact of the 00's? I'm not saying that this is guaranteed to happen, but that's a lot of money to throw at an unproven idea: a social networking site that can last. If Google pays $10 billion for this, how much are they expecting to get back out of it and by when?

[TheShadow98005]

Henry,

Facebook may indeed garner an outrageous price such as mentioned in the discussions mentioned in your posting...however, it strikes me as a symptom of our current business cycle - hitting a high point of mania, perhaps?

To put it more plain, this kind of deal, at the suggested price range, is NUTS.

For $500M, why not setup 100 teams of MIT and Standford students in garages to take away Facebook's lunch money and teach them a few lessons in innovation...

[Henry Blodget]

Unfortunately, spending $500 million on MIT and Stanford students in garages wouldn't work, because Facebook's success is now about the network effect, not the technology. You may be right that Facebook will prove to be a fad (or less monetizable than people hope/expect), but competition is not an issue right now.

[Margaret Olson]

Buying Facebook comes with a lawsuit: http://www.time.com/time/business/article/0,8599,1646696,00.html

It's hard to tell from the outside how much merit this has, but that there were two groups at Harvard working on the same thing with an overlapping development team makes merit a real possibility.